Last week, FierceBiotech attended Partnerships with CROs in Orlando. After attending several conference sessions and talking to many attendees and exhibitors, we noticed some trends affecting the industry. Here's a breakdown:
Hands wring over productivity: In more than one session, speakers lamented the declining level of pharma productivity relative to the amount of money being spent on R&D. Bigger, it seems, isn't necessarily better. While Big Pharma has the resources to produce drugs, communication between different players in the R&D process can be difficult, which ultimately slows down the whole process.
Small biotechs, on the other hand, are very efficient despite their lack of resources. There are about 2,300 compounds in clinical development around the world. Sixty-seven percent are in small biotechs, but this makes up only 2 percent of the R&D spending compared to big pharma. "If there ever was a capital disconnect, this is it," noted former Pfizer exec Peter Corr. A lot of discussion at the conference was centered around how to join Big Pharma's resources with biotech's efficiency. Additionally, as biotechs close up shop due to lack of funds, they're taking Pharma's future pipeline with them. Ensuring that good science isn't a casualty of economics is everyone's concern.
Planning is everything: The days of waste are over. Drug developers big and small have to watch every penny spent on clinical trials, which can easily balloon in cost due to unforeseen complications. One way companies can avoid unanticipated expenses by carefully planning trials to be as cost-effective and efficient as possible. Trial planning software is becoming more popular as companies identify ways to slim down and speed up R&D. It also cuts down on miscommunication between sponsors and CROs by clearly defining each party's responsibilities. Though there is an initial cash outlay for these services, in the long run, pharmas and biotechs can realize real savings through proper planning.
Tension over data quality persists: There's was quite a bit of discussion about assuring data quality in emerging markets. PPD's Simon Britton noted that while cost savings is important to drug developers, they also have to gather high-quality data, and more work needs to be done in this area. After hearing audience questions on the matter, the issue of who's responsible for data quality seems to be a point of contention between CROs and the industry. Better communication between both sides is necessary to avoid wasting time and money, especially in emerging markets.
Creating new paradigms: There was quite a bit of talk about the groundbreaking deal Lilly and Covance signed back in August of 2008. In that agreement, Lilly shifted some of its drug development work to Covance, and guaranteed the CRO $1.6 billion a year in R&D contracts. While such deals are common in drug manufacturing, it was one of the first of its kind on the drug development side of things. Lilly (which has more readily embraced outsourcing than other companies) said that the deal would allow it to be more efficient and financially flexible. As the pharma industry struggles with efficiency and costs in the coming years, more deals like the Lilly/Covance agreement will offer companies new ways to manage their business.
CRO growth comes back down to earth: CROs enjoyed robust performance from 2005 through 2008--up until Q4, that is. As biotechs cut non-essential programs, CROs are facing more trial cancellations, which is cutting into their bottom line. Overall Pharma R&D spending has decreased as well, leaving less money to outsource trials. We've seen the impact of this as CROs such as PPD and Kendle have reported falling earnings over the last several weeks. Before this, CRO stocks traded at a massive premium, but that's been corrected by the economic downturn.
Thank you to everyone who took the time to speak with us. We look forward to seeing many of you at BIO. - Maureen